I see too many startups focusing the ICO just for the fundraising, and IMHO this model will crush very soon. The ICO is a medium -not a goal- for what it should be the most important: to develop your project over a clear basis of decentralization and asset tokenizing, supporting in a clear tokenomics flow.
So tokenomics seems to be the new Product-Market fit: everyone speak about them, only a few ones understand an less are able to deploy them.
Let me explain how we designed Tokenomics in Tutellus.io, with the goal to teach, from the humility, and to help you to define them in your project;
Tokenomics as a 4 layers model
To understand the complete token worflow you need to divide in pieces, we made it in 4 layers; remember that Tokenomics are the answer to:
“What and how are you going to do to create value through token movements inside your platform?”
1. Token functionality.
Starting point. Here you have to define why and how your token is used, and by who. In our case we start with a pool being used to let people study free, so first benefits go to students;
- Students: paying products with tokens, earning tokens for studying, getting tokens through schoolarships, etc
- Teachers: earning tokens for teaching better, from Revenue companies and producing activity in the platform. Paying services with tokens.
- Companies: paying services with tokens.
- And how Tokens come again to the pool: from Students (purchases), Teachers and Companies.
The most important in this first phase is to incentive your Community to use them: in our case, we give them free (to best students) and it’s always cheaper to buy products paying in tokens that in fiat currency. First users must be your best ambassadors.
2. Token distribution.
This point is not about the physical token distribution you make in your ICO, it’s about the equivalent to “Cash Flow status” in a financial classical model: it’s about how to manage the Input & Output tokens flow being able to hold the model in the long term.
So you should consider all different flows and put together to work. In our case we project the different sources of Input & Output tokens per quarter and for the next 2 years, and use different mechanisms to regulate the pool. The goal is to hold it in the optimal volume (not big enough neither too small), regulating it with the number of schoolarships needed to optimize QAU (Quaterly Active Users) and Conversion metrics.
3. Token governance.
Token governance is a very hard-to-understand point coming from a typical company: it’s abut the way token establish the rules in the platform. In a convencional company rules are created from the CEO / Owner / Board, but in a decentralized company where value is in the token, rules must be managed by the community. So we decided several guideline rules:
- Rules related with Relevance: it’s about how the STUT is connected with the TUT and the fiat currency, using the EURO as a basis.
- Rules related with Courses: it’s about how price and Course duration can impact over the STUT and, because of that, over the money & rewards.
- Rules related with Trade decission: it’s about how and when a user needs to declare their intentions with the Course: want money or Relevance?
Token governance is a critical asset to avoid future problems and black holes in your model. Everything must be clear from the beginning, with the goal to generate trust, transparency and clear information.
4. Token workflow.
Once you’ve worked the functionality, unit economics and governance model it’s time to put all the ingredients together and to design a complete workflow, looking for loops and backfeed issues. In our case is something like this:
(I know it’s completely impossible to understand, it’s by that you have it well deployed in the Whitepaper → download it here). All steps and players should be “in harmony”, so the token workflow runs “in a glassy way”. If you surf, you know hat I’m saying 🙂
Unit economics applied to tokens are the most important assets to work before your ICO. We spent 4 months (all team 24×7) thinking about that: learning, drawing, discussing and starting again. So the best advice we can give you is: dont’ think in your ICO (and fundraising) if you don’t have clear your tokenomics.